If you need to raise a considerable sum of money, say over £25,000, then the most likely option offered to you will be a secured loan or some other kind of financial package based upon securing the loan against some form of collateral you have, such as your home. In addition to a secured loan, other solutions can include refinancing your mortgage or releasing some of the equity in your property (home equity release). Therefore, if you’re looking for a loan over 10 to 15 years, or even longer, you’re only likely to get one if you are a homeowner or have some other considerable asset to secure the loan against.
Other things to consider should include determining the reason for this kind of loan in the first place. It doesn’t make sense to take out a loan over a lengthy period of over 10 years if the overall cost of the loan isn’t likely to increase the value of what you already have so you should never look for a loan of this length for ‘pleasure’ purchases. These would include things like holidays, entertainment or furniture etc. These items only depreciate in value quickly and no-one would choose to still be paying for a luxury cruise, for example, ten years after they’ve taken the trip.
Suitable uses for the loan might include home improvements, if the improvements are likely to increase the value of your property over the long-term. Alternatively, a loan of this length might be needed to increase the amount of business you can generate if, for example, you are self-employed and providing you are confident that your business has solid long-term prospects but you need the finance to expand the operations.
Other factors when considering a long-term loan is to try and apply for one when the trend in interest rates is generally low and likely to remain low or relatively stable. You may also need to consider a variable or tracker rate loan to take into account fluctuations in interest rates. One of your major considerations, however, should be to ask yourself if your financial position is stable and likely to remain so or only improve over the term of the loan. If you can’t be positive about that, then a long-term loan might only present trouble in the long run.
Also, you should only borrow the amount you need. It makes no sense to take out, say, an additional £5000 on top of a £30000 loan if you don’t need it. Borrow just the amount that’s required and no more.
A reputable independent broker will help you consider all these issues and determine the best way forward for you and their advice is free.